Posted on 07/28/2009 6:47:25 AM PDT by SeekAndFind
Why is the stock market going up when the economy is going down? The answer might seem self evident; it is because rightly or wrongly investors are looking through the present economic gloom to a durable recovery a year or two hence. Yet this somewhat simplistic question demands more nuanced explanations than that.
Ultimately, stock markets are driven by the outlook for corporate earnings. A number of US companies have surprised on the upside in their most recent results, though it is fair to say that quite a few others have disappointed.
None the less, this renewed focus on the positive is in itself an encouraging sign. Stock market values are determined as much by sentiment as underlying realities. As such, they frequently get things hopelessly wrong.
Yet they can also be important forward-looking indicators, and right now they seem to be reflecting the balance of probabilities reasonably well. In some respects, what's going on is just a technical rally of no great significance. In Britain and the US, the latest leg of the rally since March lows is as much caused by the closing out, or hedging, of short positions as anything else.
The upswing of the past few weeks has also been achieved on the back of quite low volumes. There's no great rush by investors to buy. Indeed, fund managers who are unambiguously bullish remain thin on the ground. The bullishness comes rather from investment bankers, who are not exactly impartial observers of events.
Even so, it may be wrong to characterise the bounce as no more than a "sucker's rally" in a prolonged bear market. In fact, it is much more akin to what used to be called an "office boys' rally", which again is a not uncommon phenomenon over the summer,
(Excerpt) Read more at telegraph.co.uk ...
Yes, well, you can do that when you lay off half your staff.
The market reovery is a half a mile wide and an inch deep. Shorts, gamblers and pump and dump on low volume...this isn’t a rally, it’s iron pyrite - fool’s gold...
The markets are looking way, way down the road is all I can think of.
However, there is always the chance that next year, after a very brief recovery, we lapse into recession...again.
No matter how you view it, these sure are interesting financial times.
weird how people overlook the obvious. All these 'performing companies' had reduced top lines.
A trillion dollars is being inserted into the economy. Have you gotten any of it? No? Now you know why stocks are rising.
Smoke and mirrors.
A month or two ago, North Korea was a hot problem. And Iran was a hot problem. And forecloses. And unemployment. And inflation (or deflation). Boy, the stuff was really going to hit the fan around Aug or Sept!!!
I have no idea if things are really better or worse right now, but the media seems to be full of happy economic news, and the only big story in the news involves a Harvard professor who had a bad day.
All is sweetness and light here on planet Earth. But I sense that somewhere, a clock is ticking.
Obama is failing, which is bullish for the market ....
Well, fellow invetsors, I bailed out of equities yesterday into what I hope is a safe harbor, maybe a few hundred points low of this sucker rally, but feeling very nervous about irrational exuberance and Goldman Sachs manipulation
Harry Dent (The Great Depression Ahead) predicted a July stock market rally but by end of year- we’re going down for the count as housing and commodities bubbles burst.
http://www.youtube.com/watch?v=e_JzAEzYLt4&feature=popular
Dent hasn’t always been right but his book makes a good case for what is ahead and trends for 2009 are close to his modeling
I think what NO ONE cold have factored is the unbelievable arrogance and incompetence of the obama adminstration
It would seem this is temporary as the wealthier are taking advantage of a buying trend with lower stock prices (I am so not qualified in this field, but just saying what I’m thinking).
But at some point when the bulk of the country is forced to stop buying even more than they are, and when the government bailouts have run out, what then?
That's my guess as well. This is the first sign of the general price inflation that will follow.
“The market reovery is a half a mile wide and an inch deep. Shorts, gamblers and pump and dump on low volume...this isn’t a rally, it’s iron pyrite - fool’s gold.”
Correct. Yogi Berra once said “When you come to a fork in the road, take it. I say “If you have a profit on stocks this year, take it, and run like a thief in the night.”
In large Corps. if you layoff lots of employees it makes your forecast look good because you have cut costs.
Of course if you cut out so much that production goes down then its a wash but there is no real way to forecast such with real accuracy so the market reacts to what can be proved on the balance sheet.
Less Employees mean less cash outlay.
I was thinking the same thing. Whatever the case no economic recovery will appear in any appreciable strength to save the dems by the the midterms. This is why they are rushing to get through as much socialist legislation as possible. Of course the Republicans could still be unfocused and not gain traction when they should.
Mine included.
But... they can only do that once (and stay viable)... although we ARE still looking over our shoulders.
If I was invensting in the market, I’d cash in before congress returns from recess. With the rino’s in the senate adding the socialist agenda, socialized medicine will be here by next Janauary. And forget about the loss of freedom for a moment. The logisictal nightmare of having the government seize control of 1/6th of the economy is going to add to the economic downturn. Big time.
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